The Lipstick Effect

February 7, 2018

The use of cosmetics and beauty products can be traced back to the earliest of human activities – the ancient Egyptians are famed for their kohl eyeliner and dramatic eye makeup. A large number of beauty products in the past were sourced with natural ingredients – horrifyingly enough, charcoal and bugs were commonly used to create the pops of colours that beauty companies manufacture with using talc and parabens today. Nowadays, the cosmetics and perfume industry generates an annual revenue of $170 billion worldwide, with the industry having grown 4% in 2016 from the previous year. Our consumption of beauty products is a huge force in our global economy, and the demographic is slowly changing as societal pressures and expectations are starting to change.

The industry is most notable for its resilience even in the darkest of economic times. The infamous lipstick theory found that even during the Great Depression and the recent Great Recession of 2008, sales of cosmetics increased despite the economy shrinking – during the Great Depression sales increased by 25%. Evidence also shows employment within the industry increases during dark economic times. So why does the demand for cosmetics increase even when consumer confidence within the economy is low? Leonard Lauder, chairman of the board for Estee Lauder, one of the main players within the makeup and beauty industry, coined the term ‘the Lipstick Index’ to represent this inverse relationship of cosmetic sales and economic growth. While the use of lipstick as an economic indicator has been largely dismissed by economists – as evidence found that in some recessions, lipstick sales did fall, as expected – other beauty-oriented indexes have been suggested, such as the ‘nail polish index’, and begs an interesting question – do women see makeup and beauty products as a necessity even in an economic turmoil?

One theory is that women purchase lipstick as opposed to relatively expensive purchases such as shoes, dresses, and bags. While lipstick prices can vary widely depending on which store and brand you purchase from – from £2 up to £30 – in general, lipstick is easily accessible and can be an indulgence when it’s difficult to afford much else. The Lipstick Index shot up significantly after the 9/11 terrorist attacks in the US, and makeup-brand MAC increased shifts for production of lipsticks in factories to accommodate for this rising demand. In dark, hopeless times, it might be reasonable for women to want a pick-me-up in the form of makeup, particularly when other goods that might otherwise be indulged in are too expensive. This trend of purchasing less expensive indulgences during recessions is not only reflected in lipstick sales, but cosmetic sales as a whole – market-research firm NPD argues that while lipstick can go in and out of style, the beauty industry altogether is reflective of the odd trends we see in recessions, as women aren’t going to give up mascara from their daily makeup routine.

Could this trend be emphasised more now that the demographic of the beauty industry is slowly changing? With the rise of more men embracing makeup and feminine styles, and with it becoming more favoured in Western society, the scale of the beauty industry could only be getting bigger. The male grooming industry has risen to $50 billion since 2016, and with big name brands, such as L’Oréal and Covergirl, in the US adopting male YouTube makeup artists as the face of their companies, it is becoming less and less unusual to see men adopt skincare and makeup routines into their lifestyle. This trend hasn’t only been prevalent in Western culture too – South Korea and the rise of K-pop in recent years has shed an interesting light on the way men perceive cosmetics, with South Korean men being the world’s largest male skincare spender. It’s also not uncommon to see the K-pop stars rocking an eyeliner on national television either.

With a changing demographic for the cosmetics industry, competition will be higher than ever. Will most men eventually see skincare routines and makeup an essential the way women appear to as well? It would certainly seem that the effect of cosmetics sales rising in tough times might be emphasised due to a bigger market. While economists may have dismissed the Lipstick Index, its wider implications for the way we perceive cosmetics in our society should not be ignored, and it might not be completely ridiculous to see more of these trends in the near future.